FTC: Crude Oil Prices Main Factor in Retail Gas Prices

Why do gas prices rocket up but feather down?  That's one of many questions the Federal Trade Commission (FTC) addresses in a report released today.

Its conclusion: worldwide crude oil prices continue to be the main factor in what Americans pay at the pump.  But the FTC said it is  also investigating possible antitrust violations and market manipulation by refineries.

The report also put much of the blame for high prices on OPEC -– "a cartel that tries to restrict oil output, and which would be a criminal conspiracy if it were run by companies rather than countries,” FTC Chairman Jon Leibowitz said.

"This report is part of our ongoing focus on competition in energy markets.  The American people need to understand why they often pay so much for gasoline,” Leibowitz said.

Besides crude oil and OPEN, the report looks at factors such as how fast retail gas prices adjust to changes in wholesale gas and crude oil prices; refinery profit margins; and the possible impact of futures speculation.  

Changes over time

In addition to examining the factors that affect gasoline prices, the report focuses on changes in gasoline prices over time. Specifically, it looks at whether prices increase faster when costs go up, but fall more slowly when costs go down -– a phenomenon known as “rockets and feathers.”

The report also examines another phenomenon known as “price cycling” – unusual gas price change patterns seen in certain geographic areas.